Yes, Colleges Favor Some Rich Kids. It's Just Math.

This week’s lawsuit against 16 top colleges and universities accuses the schools of gaming their federal antitrust exemption in order to admit more wealthy students. Maybe the charges are frivolous. But even if the allegations turn out to have merit, the reason might be that admitting a certain number of rich kids is necessary for sustaining higher education.

The antitrust exemption largely tracks a 1991 agreement that settled earlier charges by the Department of Justice — in that case, that highly selective schools were colluding in, rather than competing on, their awards of financial aid. The law, which will expire this year unless Congress extends it, allows college to use a common financial aid application and common principles in analyzing the information as long as “all students admitted are admitted on a need-blind basis.” The same law prohibits schools from sharing information about “the amount or terms of any prospective financial aid award to a specific individual.” At least in theory, schools unable to share information will use financial aid packages to compete for desirable students of moderate means.

The new lawsuit, filed Monday in federal court in Illinois, alleges that the defendants admit some applicants based on factors that aren’t need-blind — thus violating the exemption’s requirement that “all” students be judged by the same factors. According to the complaint, some of the schools reduce the number of low-income students admitted in order to balance their budgets; and some use financial need as a criterion for admitting from the wait list. If these charges are true, the defendants might be in trouble.

More intriguing is the allegation that some of the schools give an admission preference to the children of those who’ve given money before or who they hope will give money in the future. Here, at least, it might be worth broadening the exemption, because some sort of a preference for a limited number of children of wealth makes sense. After all, at the typical private college or university, the capital budget may be funded by gifts, but 90% or more of the operating budget comes from tuition and fees. To put the matter crassly, that money has to come from somewhere.